National Legal Systems Governing Shared Oil and Gas Resources
Oil and gas, like other underground resources such as groundwater and living natural resources, including marine species, birds, and wildlife, do not recognize artificial boundaries that define ownership and sovereignty among individuals and states. As a result, oil and gas resources in different jurisdictions, whether classified as public property under state control or subject to private ownership, may exist in shared formations with other right holders. Therefore, legal frameworks are required to regulate the relationship between such parties and to establish rules governing the development and exploitation of shared resources.
Legal Foundations for Exploitation of Shared Oil and Gas Fields
Ownership of Oil and Gas Resources in Islamic Law
Oil and gas deposits may be classified under Islamic jurisprudence as subsurface mineral resources. Two primary legal interpretations exist regarding ownership of such resources.
The first interpretation holds that subsurface mineral resources cannot be assigned to specific individuals; rather, they belong collectively to the public as members of the Islamic community. The second interpretation permits granting exploitation rights to individuals. Among scholars supporting the second interpretation, there are differing views.
Some scholars maintain that granting rights to individuals only permits the exploitation of the resource, meaning that the right holder may own the extracted materials but does not acquire ownership of the deposit itself. Under this interpretation, the exploitation right cannot be transferred to others, nor can it be inherited by heirs upon the death of the right holder. Additionally, if the right holder ceases exploitation, the right may be revoked, and ownership returns to the public.
Other scholars argue that such grants may result in full ownership rights. Some early Shia scholars considered all mineral resources to be under the authority of the Imam, with exploitation requiring governmental authorization. This interpretation effectively reflects the principle that mineral resources belong to the public, with government authority exercised in the public interest. Consequently, Islamic legal principles generally treat mineral resources as public assets managed by governmental authorities on behalf of society.
Ownership of Oil and Gas Resources Under Iranian Law
Under Article 45 of the Constitution of the Islamic Republic of Iran, public wealth and natural resources, including abandoned lands and mineral resources, are placed under government control for management in accordance with public interest. The Constitution also provides that detailed regulations governing the use of these resources must be established by statute.
The acquisition and management of land containing oil and gas deposits, whether privately or publicly owned, as well as land required for ancillary activities of the National Iranian Oil Company, are regulated under Articles 11 through 15 of the National Iranian Oil Company Charter enacted in 1977.
In countries with centralized ownership systems, such as Iran, France, and many developing nations, oil and gas resources are typically state-owned. If oil or gas is discovered beneath privately owned land, landowners are compensated based on the value of the land without considering the discovered mineral deposits. The land is then transferred to governmental authorities or designated entities, typically national oil companies.
Legal Issues Relating to Shared Oil and Gas Reservoirs
In many cases, after national oil companies acquire operational control of exploration blocks and assign them to contractors, hydrocarbon reservoirs may be discovered that extend across multiple operational blocks. In such circumstances, legal and contractual mechanisms must be established to regulate relationships between contractors and governmental authorities concerning shared reservoirs.
Similar challenges arise when oil or gas reservoirs extend across boundaries between operational blocks and adjacent lands, thereby enabling extraction from multiple locations. In such situations, legal regulations are necessary to govern resource allocation, operational coordination, and dispute resolution among the parties involved.
Frequently Asked Questions About National Legal Systems Governing Shared Oil and Gas Resources
Oil and gas resources are fluid underground formations that may extend across property or national boundaries. Because of their transboundary nature, specific legal frameworks are required to regulate ownership and exploitation rights.
Islamic legal scholars generally regard oil and gas resources as public assets. Exploitation may be permitted under governmental authorization, and, in some interpretations, individuals may acquire ownership only of extracted materials rather than of the resource deposit itself.
Article 45 of the Iranian Constitution places natural resources, including oil and gas, under government control. The National Iranian Oil Company and related legislation regulate exploration, extraction, and management of these resources.
The primary challenge involves determining equitable resource allocation and establishing regulatory mechanisms when reservoirs extend across operational blocks, private lands, or contractual boundaries.
Governments typically establish national regulations and detailed contractual arrangements with contractors to manage exploration, extraction, and joint exploitation of shared resources while preventing disputes.
In Iran, oil and gas resources are primarily owned and managed by the state. Even when deposits are discovered beneath privately owned land, exploitation and operational control remain under government supervision. What are shared oil and gas resources, and why are they significant?
How are oil and gas resources classified under Islamic law?
How is ownership of oil and gas resources determined under Iranian law?
What challenges arise in exploiting shared oil and gas fields?
What legal mechanisms are used to manage shared reservoirs?
Is private ownership of oil and gas resources recognized in Iran?
